New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 08-06-08

The Office of General Counsel issued the following opinion on June 16, 2008 representing the position of the New York State Insurance Department.

Re: Life Settlements

Questions Presented:

1. Must a life insurance agent hold any other insurance license to broker a life settlement, or to offer the policy for sale in an auction?

2. What constitutes a viatical settlement?

Conclusions:

1. No. A licensed insurance agent who facilitates the sale of a life insurance policy that does not come within the definition of a viatical settlement-such transactions commonly called life settlements- does not require any other license.

2. A viatical settlement is defined in N. Y. Ins. Law § 7801 (West 2007).

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

The inquiry does not define the term “life settlement”, or explain its use of the words. Accordingly, the analysis set forth in the opinion is general in nature, and presumes that the term “life settlement” has the meaning commonly ascribed to such term1.

According to the records of the Insurance Department, the inquirer is licensed as an insurance agent in accordance with Insurance Law § 2103(a). Insurance Law § 7802(a) requires that anyone who facilitates (or “brokers”) the sale of life insurance policies that constitute viatical settlements must be licensed by the Insurance Department as viatical settlement brokers. There is no exception for licensed life insurance agents.

Insurance Law § 7801(c) defines a viatical settlement as an agreement between a viator and a viatical settlement company to sell a life insurance policy. Insurance Law § 7801(b) defines a “viator” as follows:

"Viator" means the owner of a life insurance policy insuring the life of a person who has a catastrophic or life threatening illness or condition, who enters into an agreement under which the viatical settlement company will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy, in return for the viator's assignment, transfer, sale, devise or bequest of the death benefit or ownership of the insurance policy to the viatical settlement company. Viator may also include a person insured under a group life insurance policy who is not prohibited from assigning his or her rights or benefits and who assigns those rights or benefits by a viatical settlement

If the policy being sold does not constitute a viatical settlement, then under present law, the broker need not have a license to act as a viatical settlement broker. However, the Insurance Department has proposed legislation this legislative session (see Senate Bill 7356 (Sen. Seward)) and Assembly Bill 10401 Assemblyman Morelle)) that aims to regulate all life settlements.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.

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1 A “life settlement” is generally considered to be the sale of a life insurance policy by an individual who is not suffering from a terminal illness.